Net Present Value Analysis

Anderson Company must evaluate two capital expenditure proposals. Anderson's hurdle rate is $12\%.$ Data for the two proposals follow.

Proposal XProposal YRequired investment$$240,000$$$240,000$Annual after$-$tax cash inflows$48,000$After$-$tax cash inflows at the end of years $3,6,9,$ and $12144,000$Life of project$12$ years$12$ years

Using net present value analysis, which proposal is the more attractive?

Do not use negative signs with your answers. Round PV answers to the nearest whole number. Use rounded answers for subsequent calculation of net present value.

Proposal XProposal YNet present valueInitial outflows

PV of future cash flows

Net present value

Which proposal is more attractive?

Answer $7$Proposal XProposal Y